PocketCoinage

Back in August, I stumbled upon Dave Ramsey’s material while researching personal finance articles.  I have heard about him before through J.D. Roth’s podcasts and blog on GetRichSlowly.org, but I never really looked into his material.  Let me tell you, I wish I looked into him sooner.

I started listening to his podcasts and I was hooked.  There were real people, with real debt problems, calling into his show to ask for his advice.  So I sat, listened, and learned.  I found out that I was on the right track with my Emergency Fund and paying off my debt.  However, I did not have the mindset to pay it off sooner.  I was on target to get my student loans of $17,000 paid off around 2015 and just accepted it.  Once I started listening to his show, I looked at that date and thought there has to be a better way!

Through his show, I found out that Dave has 7 Baby Steps to getting out of debt and building wealth:

1. Save $1000 for a starter Emergency Fund.
2. Use all available money above and beyond the $1000 Emergency Fund (minus retirement) to pay off debt; starting from the smallest balance and work your way up to the largest.  He calls it the Debt Snowball
3. Once you are debt free (except the house) start on your emergency fund of 3-6 months of expenses; not income.
4. Save 15% of income towards retirement.
5. Save for your children’s college.
6. Pay off your home mortgage.
7. Build wealth like crazy so you can live and give like no one else.

And that is the proven plan for financial fitness.  Doesn’t it seem simple?  That’s the beauty of it; It’s so simple and has common sense!  However, most people have trouble finding the right footing.  If you are committed and follow the plan exactly, you will become successful with money.  Which, oddly enough, makes you become successful in other areas of life (career, fitness, etc.).

You can start off with Baby Step 1 immediately, but there are a few things that will help you jump start your debt snowball:

• Live on less than you make
• Do a monthly written budget
• Cut back on lifestyle

I already live on less than I make, but I was pulled in so many different directions that I felt as if I could not get any traction.  I putting money into my Roth IRA, Emergency Fund, House Fund, and Vacation Fund.  Once I got myself on a written budget, I was able to see where all my money was going and gained a whole lot of control.  I found that I had about $1000 of free money to throw towards my student loan debt.

Through Dave’s advice, I was able to reduce my student loan target date from 2015 to 2011!  As of today, more than half of my loan is paid off and I have between 7 – 9 months left until it’s finished.  If I did not discovered Dave, I’m not sure that I would have been as intense in getting rid of my student loans.  To also keep me accountable, I post my student loan balance on the right side of my blog, the average monthly payment amount to reach my goal, and my target date.

You can find Dave’s one hour free podcast through iTunes and his book, The Total Money Makeover, on my list of recommended readings on the right.

You tune into the news one evening to discover that a hurricane has the potential to make landfall.  They said it could happen in about twenty days.  What do you do?  Do you deny the possibility and keep living your life, or do you start to prepare now?  You start to prepare.

This is exactly what I am doing right now.  Recently at work, there have been talks of layoffs if the finances do not improve.  I’ve heard this through the grapevine over the past three months, but nothing in writing to confirm the rumor.  This, however, changed in the past week; upper management put it in writing.  Because of this, I am officially stopping my debt snowball until the storm passes.  I should find out if they will proceed with the layoffs by next month.  Just to be safe, I’m looking to put it all on hold for the first quarter of 2011.  If things still look cloudy, I’ll continue to stock pile money.  Once things get better, I will toss all that I saved onto my debt and resume the snowball.

I’m going on a strict, written budget for the next couple of months.  I’ll keep you posted.

It’s been almost two months since my last posting and I’m sure many of you are wondering where I’ve been.

Well, I’ve been killing my student loan debt.  Just this past week I paid off one of my loans and have two more to go.  If you look in the right-hand column of my blog, you will see my countdown.  The $700 is what I calculated the average monthly payment to be.  However, in the last two months alone, I’ve been putting my payments into overdrive.

I’ve been sacrificing by cutting back my lifestyle, selling things, and budgeting to become debt free sooner.  Guess what?  It’s working! I can see the light at the end of the tunnel.  In the past three months alone I was able to allocate almost $4,000 towards my loans!  The feeling is incredible.  Before I got fired up, I was on course to pay them all off in 4.5 years.  I never thought I would pay my student loans off in a year or less.  Now I’m on target for Summer/Fall of 2011!

The key is staying motivated, having a plan, and staying focused on one goal; not a few.  I think that was my main problem.  Now with the one goal in the crosshairs, I can take it on!